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Press release from PR Newswire

City Holding Company Announces Second Quarter Results

Friday, July 27, 2012

City Holding Company Announces Second Quarter Results09:30 EDT Friday, July 27, 2012CHARLESTON, W.Va., July 27, 2012 /PRNewswire/ -- City Holding Company, "the Company" (NASDAQ:CHCO), a $2.9 billion bank holding company headquartered in Charleston, today announced second quarter net income per diluted share of $0.50 and net income of $7.4 million.  The results for the second quarter of 2012 include $4.0 million, or $0.18 diluted per share on an after tax basis, of acquisition and integration expenses related to the acquisition of Virginia Savings Bancorp, Inc.  For the second quarter of 2012, the Company achieved a return on assets of 1.06%, a return on tangible equity of 11.2%, a net interest margin of 3.91%, and an efficiency ratio of 66.5%.  Excluding the acquisition and integration expenses, the Company would have reported net income of $10.0 million, a return on assets of 1.44%, a return on tangible equity of 15.3%, and an efficiency ratio of 55.6% for the second quarter of 2012.    City's CEO Charles Hageboeck stated that, "During the second quarter of 2012, we successfully completed the acquisition of Virginia Savings Bancorp, Inc., which expanded our footprint into Virginia.  After purchase accounting adjustments, the five branches of Virginia Savings Bancorp, Inc. added approximately $123 million in deposits and $72 million in loans.  Average loan balances have increased $119 million from the second quarter of 2011 exclusive of the loans acquired in the Virginia Savings Bancorp, Inc. acquisition.  Net interest income increased $1.3 million from the second quarter of 2011 primarily on the strength of loan growth and lower rates paid on interest-bearing deposits.  Loan growth and the impact of the low interest rate environment on deposit pricing improved our net margin from 3.78% for the second quarter of 2011 to 3.91% for the second quarter of 2012.  While our margin has remained strong in recent quarters, new regulatory capital rules will cause some higher yielding trust preferred securities to be called early by issuers as these securities will no longer be treated as regulatory capital for certain issuers.  At June 30, 2012 the Company owned approximately $77 million of these higher yielding securities and we were notified that approximately $38 million of securities will be called in the third quarter of 2012.  Although we don't anticipate our entire portfolio being called, our margin will be adversely impacted by such calls."Our asset quality remains strong and steady.  Non-performing assets stood at 1.47% of total loans and other real estate owned.  Charge-offs for the second quarter of 2012 declined from prior quarters to $0.85 million and our provision expense for the quarter was $1.7 million.""Service fee revenues declined only $0.2 million from the second quarter of 2011 despite a change in check processing order implemented during the fourth quarter of 2011. Additionally, our trust and investment management fee income grew $0.2 million, or 29%, from the second quarter of 2011 due to assets under management increasing from $580 million at December 31, 2011 to $700 million at June 30, 2012," Hageboeck concluded.Net Interest IncomeThe Company's tax equivalent net interest income increased $0.3 million, or 1.3%, from $23.7 million during the first quarter of 2012 to $24.0 million during the second quarter of 2012.  This increase is due to the acquisition of Virginia Savings Bancorp, Inc. as of May 31, 2012.  The Company's reported net interest margin decreased from 3.98% for the quarter ended March 31, 2012 to 3.91% for the quarter ended June 30, 2012.Credit QualityThe Company's ratio of non-performing assets to total loans and other real estate owned remained stable at 1.47% at June 30, 2012 as compared to the prior quarter.  Past due loans were $10.7 million at June 30, 2011 (0.56% of total loans outstanding) and $11.6 million at June 30, 2012 (0.56% of total loans outstanding).  Past due residential real estate loans were $5.6 million or 0.80% of residential real estate loans outstanding at June 30, 2012; past due home equity loans were $1.9 million or 0.42% of home equity loans outstanding at June 30, 2012; and past due commercial real estate loans were $3.1 million or 0.41% of commercial real estate loans outstanding at June 30, 2012. The Company had net charge-offs of $0.9 million for the second quarter of 2012, which primarily consists of net charge-offs on residential real estate loans of $0.3 million and home equity loans of $0.3 million.At June 30, 2012, the Allowance for Loan Losses ("ALLL") was $19.5 million or 0.94% of total loans outstanding and 89% of non-performing loans compared to $18.9 million or 1.00% of loans outstanding and 81% of non-performing loans at June 30, 2011, and $19.4 million or 0.98% of loans outstanding and 88% of non-performing loans at December 31, 2011.  As a result of the Company's quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $1.7 million in the second quarter of 2012, compared to the $1.3 million for the comparable period in 2011 and $2.0 million for the first quarter of 2012.  Changes in the amount of the provision and related allowance are based on the Company's detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company's loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.  Investment Securities Gains/(Losses)During the second quarter of 2012, the Company sold certain equity positions related to community banks and bank holding companies and realized a $0.8 million gain.  This gain was partially offset by $0.3 million of credit-related net investment impairment losses recorded by the Company during the second quarter of 2012.  The charges deemed to be other than temporary were related to pooled bank trust preferreds with a remaining carrying value of $3.3 million at June 30, 2012.  The credit-related net impairment charges were based on the Company's quarterly reviews of its investment securities for indications of losses considered to be other than temporary.Non-interest IncomeExclusive of net investment gains, non-interest income decreased $0.1 million to $13.3 million in the second quarter of 2012 as compared to $13.4 million in the second quarter of 2011.  This decrease was primarily the result of service charges decreasing $0.2 million, or 2.1%, to $9.6 million and insurance commissions decreasing $0.2 million, or 10.4%, to $1.3 million for the quarter ended June 30, 2012.  These decreases were partially offset by an increase of $0.2 million in trust and investment management fee income to $0.9 for the quarter ended June 30, 2012 and $0.1 million due to the acquisition of Virginia Savings Bancorp, Inc.Non-interest ExpensesDuring the second quarter of 2012, the Company completed its acquisition of Virginia Savings Bancorp, Inc. and recognized $4.0 million of acquisition and integration expenses.  In comparison, the Company recorded a $3.0 million litigation reserve accrual during the second quarter of 2011.  Excluding these expenses, non-interest expenses increased $0.8 million from $19.9 million in the second quarter of 2011 to $20.7 million in the second quarter of 2012.  Repossessed asset losses increased $0.7 million due to the decline in estimated fair value of a foreclosed property located in eastern panhandle of West Virginia.  The Company continually reevaluates the estimated fair value of properties that it has repossessed by obtaining updated appraisals on at least an annual basis.  As a result of this write-down, this foreclosed property is now valued at approximately one half of its original cost.  In addition, salaries and employee benefits increased $0.5 million, other expenses increased $0.3 million and $0.2 million due to the acquisition of Virginia Savings Bancorp, Inc.  These increases were partially offset by a decrease of $0.5 million due to lower FDIC insurance expense as a result of a change in the assessment base methodology.      Balance Sheet TrendsLoans have increased $92.5 million (4.7%) from December 31, 2011 to $2.07 billion at June 30, 2012, primarily due to the Company's acquisition of Virginia Savings Bancorp, Inc. ($72.0 million).  Excluding the Virginia Savings Bancorp, Inc. acquisition, loans have increased $20.5 million (1.0%) from December 31, 2011 to $1.99 billion at June 30, 2012.  Increases in residential real estate loans of $25.3 million (2.7%) and commercial real estate loans of $14.8 million (2.0%) were partially offset by a decline in commercial and industrial ("C&I") loans of $17.1 million.Total average depository balances increased $64.1 million, or 2.8%, from the quarter ended March 31, 2012 to the quarter ended June 30, 2012.  This growth was primarily attributable to deposits acquired from Virginia Savings Bancorp, Inc. ($40.9 million).  Exclusive of this contribution, increases in savings deposits ($15.5 million), noninterest-bearing deposits ($16.9 million) and interest-bearing deposits ($3.8 million), were partially offset by a decrease in time deposits ($13.1 million).   Income Tax ExpenseThe Company's effective income tax rate for the second quarter of 2012 was 33.8% compared to 33.6% for the year ended December 31, 2011, and 33.8% for the quarter ended June 30, 2011.  The effective rate is based upon the Company's expected tax rate for the year ending December 31, 2012.Capitalization and LiquidityThe Company's loan to deposit ratio was 86.2% and the loan to asset ratio was 71.4% at June 30, 2012.  The Company maintained investment securities totaling 14.1% of assets as of this date.  The Company's deposit mix is weighted heavily toward checking and saving accounts that fund 50.6% of assets at June 30, 2012.  Time deposits fund 32.2% of assets at June 30, 2012, but very few of these deposits are in accounts that have balances of more than $250,000, reflecting the core retail orientation of the Company.At June 30, 2012 the Company was strongly capitalized. The Company's tangible equity ratio was 9.0% at June 30, 2012 compared to 9.4% at December 31, 2011.  At June 30, 2012, City National Bank's Leverage Ratio was 8.95%, its Tier I Capital ratio was 11.45%, and its Total Risk-Based Capital ratio was 12.38%.  These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation.On June 27, 2012, the Board approved a quarterly cash dividend of $0.35 cents per share payable July 31, 2012, to shareholders of record as of July 13, 2012.  During the quarter ended June 30, 2012, the Company repurchased 149,535 common shares at a weighted average price of $32.40 as part of a one million share repurchase plan authorized by the Board of Directors in July 2011.  At June 30, 2012, the Company could repurchase approximately 454,000 shares under the July 2011 authorization.City Holding Company is the parent company of City National Bank of West Virginia.  City National operates 73 branches across West Virginia, Kentucky, Virginia and Ohio.Forward-Looking InformationThis news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such information involves risks and uncertainties that could result in the Company's actual results differing from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company could have adverse legal actions of a material nature; (4) the Company may face competitive loss of customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company's operations materially different from those anticipated by the Company's market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company's operating results; (9) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company's operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) the current economic environment poses significant challenges for us and could adversely affect our  financial condition and results of operations; (12) continued deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; and (13) the effects of the Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") recently adopted by the United States Congress. Forward-looking statements made herein reflect management's expectations as of the date such statements are made.  Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.  Further, the Company is required to evaluate subsequent events through the filing of its June 30, 2012 Form 10-Q.  The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2012 results and will adjust the amounts if necessary.   CITY HOLDING COMPANY AND SUBSIDIARIESFinancial Highlights(Unaudited)Three Months Ended June 30,Percent20122011ChangeEarnings ($000s, except per share data):Net Interest Income (FTE)$                     24,039$                     22,7605.62%Net Income available to common shareholders7,4139,830(24.59)%Earnings per Basic Share0.500.65(22.40)%Earnings per Diluted Share0.500.64(22.45)%Key Ratios (percent):Return on Average Assets1.06%1.45%(26.98)%Return on Average Tangible Equity11.20%15.21%(26.33)%Net Interest Margin3.91%3.78%3.57%Efficiency Ratio66.45%63.49%4.66%Average Shareholders' Equity to Average Assets11.47%11.59%(1.04)%Consolidated Risk Based Capital Ratios (a):Tier I12.46%13.42%(7.15)%Total13.38%14.37%(6.89)%Tangible Equity to Tangible Assets9.03%9.56%(5.50)%Common Stock Data:Cash Dividends Declared per Share$                         0.35$                         0.342.94%Book Value per Share21.6320.585.14%Tangible Book Value per Share17.2416.842.37%Market Value per Share:High35.6236.37(2.06)%Low30.9630.551.34%End of Period33.6933.032.00%Price/Earnings Ratio (b)16.8112.7931.44%Six Months Ended June 30,Percent20122011ChangeEarnings ($000s, except per share data):Net Interest Income (FTE)$                     47,768$                     45,8234.24%Net Income available to common shareholders17,44219,445(10.30)%Earnings per Basic Share1.181.27(6.92)%Earnings per Diluted Share1.171.26(6.97)%Key Ratios (percent):Return on Average Assets1.26%1.44%(12.75)%Return on Average Tangible Equity13.30%14.94%(11.03)%Net Interest Margin3.94%3.86%2.11%Efficiency Ratio59.74%59.61%0.22%Average Shareholders' Equity to Average Assets11.51%11.75%(2.01)%Common Stock Data:Cash Dividends Declared per Share$                         0.70$                         0.682.94%Market Value per Share:High37.1637.22(0.16)%Low30.9630.551.34%Price/Earnings Ratio (b)14.2913.049.58%(a) June 30, 2012 risk-based capital ratios are estimated(b) June 30, 2012 price/earnings ratio computed based on annualized second quarter 2012 earningsCITY HOLDING COMPANY AND SUBSIDIARIESFinancial Highlights(Unaudited)Book Value and Market Price Range per ShareMarket PriceBook Value per ShareRange per ShareMarch 31June 30September 30December 31LowHigh2008$          18.92$            18.72$           17.61$            17.58$          29.08$           42.88200917.6918.2418.9519.3720.8834.34201019.7120.0220.3120.3126.8738.03201120.3920.5820.8621.0526.0637.22201221.4621.6330.9637.16Earnings per Basic ShareQuarter EndedMarch 31June 30September 30December 31Year-to-Date2008$             0.81$              0.83$            (0.16)$              0.26$            1.7420090.690.640.660.702.6920100.590.680.580.642.4820110.620.650.770.652.6820120.680.501.18Earnings per Diluted ShareQuarter EndedMarch 31June 30September 30December 31Year-to-Date2008$              0.80$              0.83$            (0.16)$              0.26$            1.7420090.690.640.660.702.6820100.580.680.580.642.4720110.620.640.760.652.6720120.670.501.17 CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Statements of Income(Unaudited) ($ in 000s, except per share data) Three Months Ended June 30, 20122011Interest IncomeInterest and fees on loans$         23,143$         23,352Interest on investment securities:Taxable 3,9434,513Tax-exempt368445Interest on federal funds sold1213Total Interest Income27,46628,323Interest ExpenseInterest on deposits3,3835,568Interest on short-term borrowings7777Interest on long-term debt165158Total Interest Expense3,6255,803Net Interest Income23,84122,520Provision for loan losses1,6751,286Net Interest Income After Provision for Loan Losses22,16621,234Non-Interest IncomeTotal investment securities impairment losses(606)-Noncredit impairment losses recognized in other comprehensive income302-   Net investment securities impairment losses(304)-Gains (losses) on sale of investment securities8323,128   Net investment securities (losses)5283,128Service charges9,6499,855Insurance commissions1,3471,504Trust and investment management fee income942730Bank owned life insurance766745Other income558575Total Non-Interest Income13,79016,537Non-Interest ExpenseSalaries and employee benefits10,66810,183Occupancy and equipment1,9781,921Depreciation1,1091,140FDIC insurance expense394932Advertising675628Bankcard expenses694633Postage, delivery, and statement mailings488510Office supplies396452Legal and professional fees4213,511Telecommunications387417Repossessed asset (gains)/losses, net of expenses650(7)Merger related expenses4,042-Other expenses2,8612,592Total Non-Interest Expense24,76322,912Income Before Income Taxes 11,19314,859Income tax expense3,7805,029Net Income Available to Common Shareholders$           7,413$           9,830Distributed earnings allocated to common shareholders$           5,146$           5,092Undistributed earnings allocated to common shareholders2,2084,669Net earnings allocated to common shareholders$           7,354$           9,761Average common shares outstanding14,68015,120Effect of dilutive securities:Employee stock options7973Shares for diluted earnings per share14,75915,193Basic earnings per common share$             0.50$             0.65Diluted earnings per common share$             0.50$             0.64Dividends declared per common share$             0.35$             0.34Comprehensive Income$           6,673$           9,896  CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Statements of Income(Unaudited) ($ in 000s, except per share data) Six months ended June 30, 20122011Interest IncomeInterest and fees on loans$         46,210$         47,090Interest on investment securities:Taxable 7,9079,055Tax-exempt755907Interest on federal funds sold2326Total Interest Income54,89557,078Interest ExpenseInterest on deposits7,05111,279Interest on short-term borrowings150149Interest on long-term debt333315Total Interest Expense7,53411,743Net Interest Income47,36145,335Provision for loan losses3,6252,372Net Interest Income After Provision for Loan Losses43,73642,963Non-Interest IncomeTotal investment securities impairment losses(606)-Noncredit impairment losses recognized in other comprehensive income302-   Net investment securities impairment losses(304)-Gains on sale of investment securities8013,128   Net investment securities gains (losses)4973,128Service charges18,73918,909Insurance commissions3,3433,125Trust and investment management fee income1,7491,483Bank owned life insurance1,4891,503Other income1,0911,051Total Non-Interest Income26,90829,199Non-Interest ExpenseSalaries and employee benefits20,91320,095Occupancy and equipment3,9134,027Depreciation2,1952,276FDIC insurance expense7791,884Advertising1,3191,308Bankcard expenses1,3141,134Postage, delivery, and statement mailings1,0361,064Office supplies851991Legal and professional fees7383,980Telecommunications776846Repossessed asset losses, net of expenses771191Merger related expenses4,177-Other expenses5,4964,974Total Non-Interest Expense44,27842,770Income Before Income Taxes 26,36629,392Income tax expense8,9249,947Net Income Available to Common Shareholders$         17,442$         19,445Distributed earnings allocated to common shareholders$         10,291$         10,184Undistributed earnings allocated to common shareholders7,0119,123Net earnings allocated to common shareholders$         17,302$         19,307Average common shares outstanding14,67615,244Effect of dilutive securities:Employee stock options8478Shares for diluted earnings per share14,76015,322Basic earnings per common share$             1.18$             1.27Diluted earnings per common share$             1.17$             1.26Dividends declared per common share$             0.70$             0.68Comprehensive Income$         18,872$         20,104 CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Statements of Changes in Stockholders' Equity(Unaudited) ($ in 000s)Three Months EndedJune 30, 2012June 30, 2011Balance at April 1$                 316,046$                  311,122Net income7,4139,830Other comprehensive income:Change in unrealized (loss) gain on securities available-for-sale(740)165Change in unrealized (loss) on interest rate floors-(99)Cash dividends declared ($0.35/share) and ($0.34/share), respectively(5,188)(5,129)Issuance of stock award shares, net213202Acquisition of Virginia Savings Bancorp7,723-Purchase of 149,535 common shares of treasury(4,845)-Purchase of 176,779 common shares of treasury-(5,712)Balance at June 30$                 320,622$                  310,379Six Months EndedJune 30, 2012June 30, 2011Balance at January 1$                311,134$                  314,861Net income17,44219,445Other comprehensive income:Change in unrealized gain on securities available-for-sale1,430954Change in unrealized (loss) on interest rate floors-(295)Cash dividends declared ($0.70/share) and ($0.68/share), respectively(10,335)(10,320)Issuance of stock award shares, net655666Acquisition of Virginia Savings Bancorp7,723-Exercise of 16,899 stock options488-Exercise of 5,476 stock options-153Purchase of 237,535 common shares of treasury(7,915)-Purchase of 447,524 common shares of treasury-(15,085)Balance at June 30$                 320,622$                  310,379 CITY HOLDING COMPANY AND SUBSIDIARIESCondensed Consolidated Quarterly Statements of Income(Unaudited) ($ in 000s, except per share data)Quarter EndedJune 30March 31December 31September 30June 3020122012201120112011Interest income$            27,466$          27,430$          27,441$          28,370$          28,323Taxable equivalent adjustment198208215212240Interest income (FTE)27,66427,63827,65628,58228,563Interest expense3,6253,9084,2164,7995,803Net interest income24,03923,73023,44023,78322,760Provision for loan losses1,6751,9502,229-1,286Net interest income after provision for loan losses22,36421,78021,21123,78321,474Noninterest income13,79013,11812,12813,53116,537Noninterest expense24,76319,51518,68519,68822,912Income before income taxes11,39115,38314,65417,62615,099Income tax expense3,7805,1444,7875,8375,029Taxable equivalent adjustment198208215212240Net income available to common shareholders$              7,413$          10,031$             9,652$          11,577$            9,830Distributed earnings allocated to common shareholders$              5,146$            5,118$             5,136$             5,015$            5,092Undistributed earnings allocated to common shareholders2,2084,8374,4466,4794,669Net earnings allocated to common shareholders$              7,354$            9,955$             9,582$           11,494$            9,761Average common shares outstanding14,68014,67914,74315,00315,120Effect of dilutive securities:Employee stock options7980716873Shares for diluted earnings per share14,75914,75914,81415,07115,193Basic earnings per common share$                0.50$              0.68$               0.65$               0.77$               0.65Diluted earnings per common share0.500.670.650.760.64Cash dividends declared per share0.350.350.350.340.34Net Interest Margin3.91%3.98%3.90%3.93%3.78%  CITY HOLDING COMPANY AND SUBSIDIARIESNon-Interest Income and Non-Interest Expense(Unaudited) ($ in 000s)Quarter EndedJune 30March 31December 31September 30June 3020122012201120112011Non-Interest Income:Service charges$            9,649$            9,090$            9,360$            9,840$            9,855Insurance commissions1,3471,9961,4331,3881,504Trust and investment management fee income942807925699730Bank owned life insurance766723728952745Other income558533599380575Subtotal13,26213,14913,04513,25913,409Total investment securities impairment losses(606)-(918)(1,849)-Noncredit impairment losses recognized in other comprehensive income302--1,494-Net investment securities impairment losses(304)-(918)(355)-Gain (loss) on sale of investment securities832(31)16273,128Total Non-Interest Income$          13,790$          13,118$          12,128$          13,531$          16,537Non-Interest Expense:Salaries and employee benefits$          10,668$          10,245$          10,320$          10,302$          10,183Occupancy and equipment1,9781,9351,9292,0571,921Depreciation1,1091,0861,1001,1311,140FDIC insurance expense394385300392932Advertising675644153546628Bankcard expenses694620566559633Postage, delivery and statement mailings488548484551510Office supplies396455429492452Legal and professional fees4213173665673,511Telecommunications387389388371417Repossessed asset (gains) losses, net of expenses650121(27)109(7)Merger related expenses4,042135---Other expenses2,8612,6352,6772,6112,592Total Non-Interest Expense$          24,763$           19,515$           18,685$          19,688$           22,912Employees (Full Time Equivalent)831797795792795Branch Locations7368686868 CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Balance Sheets($ in 000s)June 30December 3120122011(Unaudited)AssetsCash and due from banks$                90,630$              140,873Interest-bearing deposits in depository institutions8,4105,526Federal funds sold35,000-Cash and cash equivalents134,040146,399Investment securities available-for-sale, at fair value376,891360,783Investment securities held-to-maturity, at amortized cost19,31923,458Other securities11,68611,934Total investment securities407,896396,175Gross loans2,065,5891,973,103Allowance for loan losses(19,452)(19,409)Net loans2,046,1371,953,694Bank owned life insurance80,40778,961Premises and equipment, net72,51664,612Accrued interest receivable7,0907,093Net deferred tax assets34,71632,219Intangible assets65,16256,164Other assets45,50241,792Total Assets$            2,893,466$            2,777,109LiabilitiesDeposits:Noninterest-bearing$               421,664$               369,025Interest-bearing:Demand deposits543,623526,824Savings deposits498,815439,823Time deposits931,278885,596Total deposits2,395,3802,221,268Short-term borrowingsFederal Funds purchased-75,000Customer repurchase agreements123,074114,050Long-term debt16,49516,495Other liabilities37,89539,162Total Liabilities2,572,8442,465,975Stockholders' EquityPreferred stock, par value $25 per share: 500,000 shares authorized; none issued--Common stock, par value $2.50 per share: 50,000,000 shares authorized;     18,499,282 shares issued at June 30, 2012 and December 31, 2011    less 3,678,649 and 3,717,993 shares in treasury, respectively46,24946,249Capital surplus103,449103,335Retained earnings298,155291,050Cost of common stock in treasury(124,754)(125,593)Accumulated other comprehensive loss:Unrealized gain on securities available-for-sale2,255825Underfunded pension liability(4,732)(4,732)Total Accumulated Other Comprehensive Loss(2,477)(3,907)Total Stockholders' Equity320,622311,134Total Liabilities and Stockholders' Equity$            2,893,466$            2,777,109CITY HOLDING COMPANY AND SUBSIDIARIESInvestment Portfolio(Unaudited) ($ in 000s)Original CostCredit-Related Net Investment Impairment Losses through June 30, 2012Unrealized Gains (Losses)Carrying ValueUS Government Agencies$            5,331$                   -$                119$             5,450Mortgage Backed Securities243,939-7,111251,050Municipal Bonds52,197-1,73653,933Pooled Bank Trust Preferreds27,035(19,900)(3,843)3,292Single Issuer Bank Trust Preferreds,Subdebt of Financial Institutions, andBank Holding Company Preferred Stocks79,227(1,015)(1,522)76,690Money Markets and Mutual Funds1,724-561,780Federal Reserve Bank and FHLB stock11,686--11,686Community Bank Equity Positions9,368(5,263)(90)4,015Total Investments$          430,507$           (26,178)$              3,567$          407,896 CITY HOLDING COMPANY AND SUBSIDIARIESLoan Portfolio(Unaudited) ($ in 000s)June 30March 31December 31September 30June 3020122012201120112011Residential real estate (1)$          997,016$          939,611$          929,788$          916,122$          902,846Home equity - junior liens (including lines of credit)143,400139,764141,797142,028140,024Commercial and industrial116,288108,707130,899119,377121,149Commercial real estate (2)768,176745,586732,146708,558693,959Consumer37,38335,44835,84536,57536,626DDA overdrafts3,3262,8482,6282,9242,415Previously securitized loans---214325Gross Loans$       2,065,589$       1,971,964$       1,973,103$       1,925,798$       1,897,344Construction loans included in:(1)- Residential real estate loans$            11,919$            11,613$              9,287$              7,456$              6,879(2)- Commercial real estate loans$            18,544$            20,661$            20,201$            23,915$            23,433  CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Average Balance Sheets, Yields, and Rates(Unaudited) ($ in 000s)Three Months Ended June 30,20122011Average Yield/Average Yield/BalanceInterestRateBalanceInterestRateAssets:Loan portfolio (1):Residential real estate (2)$    1,096,164$          11,9044.37%$    1,031,768$          12,3074.78%Commercial, financial, and agriculture (3)876,6789,7424.47%797,9099,4404.75%Installment loans to individuals (4)46,4397516.50%46,4278527.36%Previously securitized loans (5) *** 746 *** 426753708.98%Total loans2,019,28123,1434.61%1,876,53023,3524.99%Securities:Taxable378,6563,9434.19%449,0064,5134.03%Tax-exempt (6)39,6785665.74%48,3516855.68%Total securities418,3344,5094.34%497,3575,1984.19%Deposits in depository institutions8,863--7,298--Federal funds sold24,212120.20%35,000130.15%Total interest-earning assets2,470,69027,6644.50%2,416,18528,5634.74%Cash and due from banks70,85852,867Bank premises and equipment68,93664,432Other assets215,692203,262Less:  Allowance for loan losses (19,179)(18,797)       Total assets$     2,806,997$    2,717,949Liabilities:Interest-bearing demand deposits533,6661730.13%489,8762430.20%Savings deposits474,9761840.16%417,4532730.26%Time deposits895,9213,0261.36%960,1875,0522.11%Short-term borrowings121,424770.26%120,139770.26%Long-term debt16,4951654.02%16,4951583.84%   Total interest-bearing liabilities2,042,4823,6250.71%2,004,1505,8031.16%Noninterest-bearing demand deposits413,709379,129Other liabilities28,92119,707Stockholders' equity321,885314,963Total liabilities and stockholders' equity$     2,806,997$    2,717,949Net interest income$          24,039$          22,760Net yield on earning assets3.91%3.78%(1)For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income.(2) Interest income includes $0 and $154 from interest rate floors for the three months ended June 30, 2012 and June 30, 2011, respectively.(3) Includes the Company's commercial and industrial and commercial real estate loan categories.  Interest income includes $0 and $242 from interest rate floors for the three months ended June 30, 2012 and June 30, 2011, respectively.(4) Includes the Company's consumer and DDA overdrafts loan categories.(5) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.(6)Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%. CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Average Balance Sheets, Yields, and Rates(Unaudited) ($ in 000s)Six Months Ended June 30,20122011Average Yield/Average Yield/BalanceInterestRateBalanceInterestRateAssets:Loan portfolio (1):Residential real estate (2)$    1,082,038$          23,7314.41%$    1,027,566$          24,8514.88%Commercial, financial, and agriculture (3)869,78219,3264.47%795,23818,9174.80%Installment loans to individuals (4)44,0601,5216.94%45,8411,6647.32%Previously securitized loans (5) *** 1,632 *** 5411,658618.02%Total loans1,995,88046,2104.66%1,869,18647,0905.08%Securities:Taxable365,2337,9074.35%434,6249,0554.20%Tax-exempt (6)40,3971,1625.78%49,5321,3955.68%Total securities405,6309,0694.50%484,15610,4504.35%Deposits in depository institutions8,225--7,976--Federal funds sold25,837230.18%30,913260.17%Total interest-earning assets2,435,57255,3024.57%2,392,23157,5664.85%Cash and due from banks73,17154,653Bank premises and equipment66,84164,387Other assets216,033203,875Less:  Allowance for loan losses (19,452)(18,677)       Total assets$    2,772,165$     2,696,469Liabilities:Interest-bearing demand deposits528,7143510.13%487,5534870.20%Savings deposits461,7053720.16%409,8185300.26%Time deposits892,5166,3281.43%956,43010,2622.16%Short-term borrowings117,6851500.26%115,6901490.26%Long-term debt16,4953334.06%16,4953153.85%   Total interest-bearing liabilities2,017,1157,5340.75%1,985,98611,7431.19%Noninterest-bearing demand deposits403,305374,270Other liabilities32,67619,494Stockholders' equity319,069316,719Total liabilities and stockholders' equity$    2,772,165$     2,696,469Net interest income$          47,768$          45,823Net yield on earning assets3.94%3.86%(1)For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income.(2) Interest income includes $0 and $632 from interest rate floors for the six months ended June 30, 2012 and June 30, 2011, respectively.(3) Includes the Company's commercial and industrial and commercial real estate loan categories.  Interest income includes $0 and $488 from interest rate floors for the six months ended June 30, 2012 and June 30, 2011, respectively.(4) Includes the Company's consumer and DDA overdrafts loan categories.(5) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.(6)Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%. CITY HOLDING COMPANY AND SUBSIDIARIESAnalysis of Risk-Based Capital(Unaudited) ($ in 000s)June 30March 31December 31September 30June 302012 (a)2012201120112011Tier I Capital:Stockholders' equity$        320,622$         316,046$        311,134$         309,892$         310,379Goodwill and other intangibles(64,971)(55,871)(55,969)(56,071)(56,173)Accumulated other comprehensive loss (income)2,4771,7373,9072,7011,838Qualifying trust preferred stock16,00016,00016,00016,00016,000Unrealized loss on AFS securities--(448)(1,081)(82)Excess deferred tax assets(7,847)(4,020)(5,897)(5,435)(4,462)Total tier I capital$        266,282$         273,892$        268,727$         266,007$         267,500Total Risk-Based Capital:Tier I capital$         266,282$         273,892$         268,727$         266,007$         267,500Qualifying allowance for loan losses19,45218,62819,40919,84818,944Total risk-based capital$         285,734$         292,520$         288,136$         285,855$         286,444Net risk-weighted assets$      2,136,249$      2,050,520$      2,048,398$      2,013,294$      1,993,003Ratios:Average stockholders' equity to average assets11.47%11.55%11.65%11.67%11.59%Tangible capital ratio9.03%9.54%9.37%9.65%9.56%Risk-based capital ratios:Tier I capital12.46%13.36%13.12%13.21%13.42%Total risk-based capital13.38%14.27%14.07%14.20%14.37%Leverage capital9.74%10.23%10.18%10.04%10.07%(a) June 30, 2012 risk-based capital ratios are estimatedCITY HOLDING COMPANY AND SUBSIDIARIESIntangibles(Unaudited) ($ in 000s)As of and for the Quarter EndedJune 30March 31December 31September 30June 3020122012201120112011Intangibles, net$           65,162$           56,066$           56,164$           56,266$           56,368Intangibles amortization expense10998102102103 CITY HOLDING COMPANY AND SUBSIDIARIESSummary of Loan Loss Experience(Unaudited) ($ in 000s)Quarter EndedJune 30March 31December 31September 30June 3020122012201120112011Balance at beginning of period$          18,628$           19,409$           19,848$         18,944$          18,414Charge-offs:Commercial and industrial4869247200-Commercial real estate271,9881,650141166Residential real estate296198176264377Home equity347509475209168Consumer3659317514DDA overdrafts375335394492392Total charge-offs1,1293,1582,9731,3811,117Recoveries:Commercial and industrial-21523Commercial real estate196-1,95426Residential real estate3410112Home equity101114Consumer3529295811DDA overdrafts229295250269305Total recoveries2784273052,285361Net charge-offs8512,7312,668(904)756Provision for loan losses1,6751,9502,229-1,286Balance at end of period$          19,452$           18,628$           19,409$           19,848$           18,944Loans outstanding$       2,065,589$      1,971,964$       1,973,103$      1,925,798$       1,897,344Average loans outstanding2,019,2811,972,4781,940,9501,917,2461,876,530Allowance as a percent of loans outstanding0.94%0.94%0.98%1.03%1.00%Allowance as a percent of non-performing loans88.92%88.78%87.76%87.27%81.08%Net charge-offs (annualized) as apercent of average loans outstanding0.17%0.55%0.55%(0.19)%0.16%Net charge-offs, excluding overdraft depositaccounts, (annualized) as a percent of average loans outstanding0.14%0.55%0.52%(0.24)%0.14% CITY HOLDING COMPANY AND SUBSIDIARIESSummary of Non-Performing Assets(Unaudited) ($ in 000s)June 30March 31December 31September 30June 3020122012201120112011Nonaccrual loans$          21,726$           20,420$           21,951$           22,423$           23,178Accruing loans past due 90 days or more149562166320188Total non-performing loans21,87520,98222,11722,74323,366Other real estate owned8,6978,2507,9488,2737,999Total non-performing assets$          30,572$           29,232$           30,065$           31,016$           31,365Non-performing assets as a percent of loans and other real estate owned1.47%1.48%1.52%1.60%1.65%CITY HOLDING COMPANY AND SUBSIDIARIESSummary of Total Past Due Loans(Unaudited) ($ in 000s)June 30March 31December 31September 30June 3020122012201120112011Residential real estate$            5,575$             4,108$             5,362$             4,569$             4,971Home equity1,8641,5602,2462,4252,299Commercial and industrial540631,24337476Commercial real estate3,1452,6363,4152,4232,186Consumer9058138112185Previously securitized loans---403305DDA overdrafts364304909614279Total past due loans$          11,578$             8,729$           13,313$           10,583$           10,701 SOURCE City Holding CompanyFor further information: Charles R. Hageboeck, Chief Executive Officer and President, +1-304-769-1102